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New Policy Memo: The Ruble and the Yuan: Allies or Competitors?

The BRICS states—Brazil, Russia, India, China, and South Africa—have increasingly sought to develop and diversify the international monetary system in ways that do not rely on dialogue with the system’s traditional powers. They are now using the BRICS forum to reinforce economic cooperation among themselves and to create alternatives and work-arounds to existing international institutions.

Russia’s official “Concept of the Russian Federation’s Participation in BRICS,” released just ahead of the March 2013 BRICS summit in Durban, South Africa, views the bloc as forging “a new model of global relations, which supersedes the old division lines between the East and the West, or between the North and the South.” Advancing fundamental reform of the international monetary system through the BRICS represents a central pillar of the concept document.

The BRICS states have two major related initiatives in this regard: to promote a multicurrency-based international monetary system by increasing the use of each other’s currencies in place of the U.S. dollar, and to create a BRICS development bank as an alternative to the IMF/World Bank.

These efforts face substantial obstacles, however, chiefly because of the competitive relationship between Russia and China. The yuan has greater potential for internationalization than does the ruble, although Russia is reluctant to acknowledge this fact, given its own international and regional monetary ambitions. The scope of concrete BRICS cooperation in this area thus seems destined to be limited to small and largely symbolic efforts that, on their own, cannot effectively challenge the international status quo.